COMPLIANCE NEWS – INSURERS
AUGUST ISSUE | 2020
This month we look at the enactment of the Privacy Act 2020, the Financial Markets Authority’s (FMA) latest short-term priorities, and changes to the updated FMA levies.
We also provide our general update on relevant legislation.
PRIVACY ACT 2020
The Privacy Bill (Bill) received the royal assent on 30 June 2020 and became the Privacy Act 2020 (Act). As explained in last month’s newsletter, the Act will replace the Privacy Act 1993 on 1 December 2020.
A media release from Privacy Commissioner John Edwards highlights the following key reforms:
- Mandatory notification of harmful privacy breaches.
- Introduction of Commissioner compliance orders.
- Binding access determinations.
- New controls on disclosure of information overseas.
- New criminal offences.
- Explicit application of privacy legislation to businesses regardless of physical presence in New Zealand.
Part 7 of the Act contains the provisions for mandatory notification of harmful privacy breaches and compliance notices. Agencies should ensure they understand and are familiar with their obligations under these provisions. In our April 2020 issue we recommended that agencies have systems and processes in place to identify and report notifiable privacy breaches when they occur. An agency that fails to notify a notifiable privacy breach will be liable for a fine up to $10,000.
New information privacy principle 12 addresses disclosure of personal information outside New Zealand. The principle states that an agency can only disclose in circumstances where it believes on reasonable grounds that appropriate safeguards are in place.
Also of particular note is the ability of “aggrieved individuals” to bring class actions, the strengthened information gathering powers for the Privacy Commissioner, and the updated requirement to appoint a Privacy Officer.
Please contact us if you have any questions about the Privacy Act 2020.
FMA RELEASES STATEMENT OF PRIORITIES FOR COVID-19 RESPONSE AND RECOVERY
On 27 July the FMA released an information sheet outlining its priorities for the COVID-19 response and recovery over the next three to six months.
In accordance with its functions, the FMA’s immediate priorities are aimed at promoting trust and confidence in New Zealand’s financial markets. In the information sheet the FMA identifies specific areas it intends to focus on over the coming months. These include the reintroduction of regulatory activity and the treatment of customers and investors. Regulatory activity is expected to restart in a phased approach and on-site engagements are scheduled to commence this month.
In line with the expectations it set in respect of vulnerable customers in June, the FMA has reiterated its expectation that firms will be able to demonstrate how they have addressed the issue of vulnerable customers as it continues to engage with industry over the coming months.
Please contact us if you have any questions about the FMA’s regulatory approach in the context of COVID-19.
VARIATIONS TO FMA FUNDING BOOST CONFIRMED BY CABINET
In June we reported that the decision to increase the FMA’s funding to a total of $60.8 million was made in this year’s budget. The funding increase is being phased over three years with an increase of $12.5 million in 2020/21, $17.5 million in 2021/22, and $24.805 million in 2022/23.
On 22 July Cabinet confirmed the FMA levy increases for the second and third years of the phased increase, as well as they levy amounts for the outyears. The appendix to the related Cabinet paper sets out the new FMA funding model that will be implemented by amendments to the Financial Markets Authority (Levies) Regulations 2012. The Financial Markets Authority (Levies) Amendment Regulations 2019 have been revoked.
The new funding model includes structural changes to levy tiers that had been identified as “out-of-step” with the size and make-up of market participants. A change to preserve the application of previous levy waivers has also been made. Of particular note is the splitting of the top two tiers in the licenced insurer class into four new tiers with a higher maximum threshold.
Each tier is based upon annual gross premium revenue. The $100 to $500 million tier will now be covered by a $100–$250 million tier and a $250– $500 million tier. The $500 million plus tier will now be covered by a $500 million–$1 billion tier and a $1 billion plus tier. Licenced insurers will contribute 10.33% of total levies once fully phased in.
Please contact us if you have any questions about the new FMA levies.
Privacy Act 2020
The Privacy Bill was passed into law on 30 June 2020. As explained above, the Privacy Act 2020 will replace the Privacy Act 1993 on 1 December 2020.
Insurance (Prompt Settlement of Claims for Uninhabitable Residential Property) Bill
The Insurance (Prompt Settlement of Claims for Uninhabitable Residential Property) Bill had its first reading on 21 July 2020. It will be considered by the Governance and Administration Select Committee.
The Bill intends to facilitate the swift resolution of uninhabitable property claims lodged with insurers by implementing a legal framework and specific parameters within which insurers much act. As it is currently drafted the Bill would require insurers to:
- take all reasonably practicable steps to ensure that an insurance claim relating to uninhabitable property is processed as promptly as possible; and
- determine and notify claims relating to uninhabitable property within 6 months of receipt.
The Bill contemplates that issues may arise in the claims process and accordingly allows insurers 12 months to determine a claim in specified circumstances. Where there is a local or national emergency, there is an ability for the responsible Minister to extend the 6 month deadline.
Financial Markets (Conduct of Institutions) Amendment Bill
The Financial Markets (Conduct of Institutions) Amendment Bill passed its first reading on 12 February 2020. The Finance and Expenditure Committee is considering the Bill. Submissions closed on 30 April 2020.
Fair Trading Amendment Bill
The Fair Trading Amendment Bill passed its first reading on 12 February 2020. The Economic Development, Science, and Innovation Committee is considering the Bill. Submissions closed on 26 April 2020.
Insurance Contract Law Review
The Ministry of Business, Innovation and Employment is completing a review of New Zealand’s insurance contract law. The purpose of the review is to ensure insurance markets work well and enable individuals and businesses to effectively protect themselves against risk. The Minister of Commerce and Consumer Affairs Hon Kris Faafoi has explained he considers the review a priority. There is no timeline yet.
Review of the Insurance (Prudential Supervision) Act 2010
The Reserve Bank of New Zealand has paused work on the review of the Insurance (Prudential Supervision) Act 2010 in light of COVID-19.
Disclaimer: The information contained in this newsletter is provided for general purposes only, and should not be construed as legal advice on any matter.
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